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October 20, 2018

Lotte chief’s jail term reignites succession battle

PUBLISHED : February 14, 2018 - 15:18

UPDATED : February 14, 2018 - 15:18

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[THE INVESTOR] A Seoul court’s verdict that put Lotte Chairman Shin Dong-bin behind bars has put the retail giant in disarray, reigniting a succession battle  between Shin and his older brother, Shin Dong-joo.

The elder Shin demanded his younger brother, who heads Lotte’s operations in Korea and Japan, resign his post as the chairman of Lotte Holdings. The unlisted company holds 99 percent shares in Hotel Lotte, the de facto holding company of the retail giant’s South Korea operation.




Dong-joo was the former chief of Lotte Holdings, before he was ousted during a fraternal battle over the control of the conglomerate in 2016.

The elder brother remains as the head of Kojunsha, which holds a 28.1 percent stake in Lotte Holdings.

The possibility of the elder brother taking the leadership of Lotte Holdings is quite high, as it’s common in Japan for management leaders to step down if convicted of a crime.

 On Feb. 13, Shin was convicted of giving 7 billion won ($6.4 million) in bribes to a foundation run by Choi Soon-sil as he sought favors in winning a government license to run a duty free business in Seoul. Shin was immediately taken into custody following the court ruling.

In his absence, the country’s fifth-largest conglomerate will be steered by vice chairman Hwang Kag-gyu, the right-hand man to carry out strategies devised by Shin.

While Lotte said it would activate its emergency management system to reassure employees, customers and shareholders, it is likely that Shin’s imprisonment could tarnish the conglomerate’s image and throw a wrench into management structure plans.

The leadership vacuum may also hamper long-standing business goal agendas such as the planned listing of Hotel Lotte.

As part of restructuring efforts, Chairman Shin has been putting effort recently to reduce Lotte Holdings’ stake in Hotel Lotte through a stock listing. This will allow him to cement his control over the group, experts said.

In 2016, Lotte pushed for the IPO of Hotel Lotte, but it has been delayed twice over a corruption scandal involving the Shin family, as well as a backlash from Chinese customers amid a diplomatic row between South Korea and China over Seoul’s decision to deploy an US anti-missile system.

By Kim Da-sol/The Korea Herald (ddd@heraldcorp.com)

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